![](\"https:\/\/taxwhatifdoctor.com\/wp-content\/uploads\/Blog-Pic-2023.03.21.png\" "\\"Why")
<\/a><\/div>Why Do People Fear Tax Audits More Than They Fear Overpaying?<\/a><\/span>Ask anyone if they \u201cpay too much income tax\u201d and the knee jerk reaction is almost always, \u201cYes!\u201d and without much hesitation. Why do we call that a knee jerk reaction? Because if you then follow the question up with two more questions, \u201cWhat did you pay in federal tax last year? And\/or what bracket are you in?\u201d they almost as quickly say, \u201cI don\u2019t remember, or I\u2019m not sure.\u201d Or they might guess at a bracket percentage, but usually not correctly. We\u2019ve even had people profess the pain of paying too much in tax only to discover that not only did they get back all of their withholdings, but they were given tax credit refunds of money they did<\/p><\/div><\/li>
<\/a><\/div>Not Everyone Should be Trying to Lower Their Tax Bill<\/a><\/span>It may sound odd when you say it out loud, but after considering all the facts, it\u2019s quite true. It\u2019s an emotional but understandable reaction to think you always want to lower your tax bill as much as possible. However, except in the case of death, the tax code is basically a case of \u201ctax me now or tax me later.\u201d In many cases, to lower your current tax bill means that income avoided or deductions taken now are going to come back into your life at some later point. One example would be an IRA. You put money in an IRA and lower today\u2019s tax bill, but those dollars will need to be taxed at some point. When you<\/p><\/div><\/li>
<\/a><\/div>\u201cDon\u2019t Let the Tax Tail Wag the Dog!\u201d Can Be Bad Advice<\/a><\/span>In the \u201cold days,\u201d you went to the general store for your dry goods, the blacksmith for your horseshoes or tool repair and likely had your own cow and chickens for milk and eggs. Fast forward, you went to a lawyer to get a will, an insurance rep to get a policy and an accountant to get your taxes done. There was no internet, so information was something you had to gather and organize yourself. You would talk to a few co-workers, a family member, a mentor and then take actions based on the limited intel. Back then, you would sit with a financial advisor, and if they were a big deal they might have a stock ticker pumping out<\/p><\/div><\/li>
<\/a><\/div>If You Think Your CPA is Telling You Everything You Need to Know\u2026Think Again<\/a><\/span>First, let us make it clear that we aren\u2019t saying that your CPA or accountant is doing anything wrong.\u00a0The accounting industry is one of the most honorable and respected fields around. That being said, there is a misconception that they are going to be proactive when advising clients about their taxes, and that\u2019s just not part of the training most have received.\u00a0Certainly some are, but the majority who know things about steps a business could take to perhaps be more aggressive on tax planning for the future, don\u2019t feel it\u2019s their responsibility to pursue a client in engaging in alternative accounting choices or behaviors. A good example is \u201cBob\u201d who owns a tire shop that has grown from two employees<\/p><\/div><\/li>
<\/a><\/div>Timing Is an Important Part of Tax Planning<\/a><\/span>Have you ever seen a cat on the side of the road that waits until the very last second and then darts across the road in front of traffic? Ever see one that didn\u2019t make it and think, \u201cSome child is going to be very sad soon.\u201d? I always wonder what makes the cat wait until the last second, but then again that\u2019s what most taxpayers seem to do. They wait until February or March with a filing deadline looming and then dash out in front of a tax preparer and beg, \u201cIs there anything we can do to lower this?\u201d\u00a0 Like the cat, perhaps the preparer has an idea and they miss getting hit with the entire bill, but<\/p><\/div><\/li><\/ul> <\/div>